OLG

Author

Affiliation

Èric Roca Fernández

CERDI-UCA

1 Syllabus

This course provides an overview to the Overlapping Generations (OLG) model, one of the most versatile and influential frameworks in modern macroeconomics. Unlike the Ramsey model with infinitely-lived agents, the OLG framework captures the realistic life-cycle dynamics where individuals live for finite periods, making decisions about consumption, savings, and intergenerational transfers.

The OLG model is particularly powerful for analyzing issues that involve intergenerational considerations, such as social security systems, public debt sustainability, educational policies, and long-run economic development. The course combines theoretical foundations with applications to contemporary economic research, demonstrating how this framework helps us understand fundamental questions about economic growth, inequality, and policy design.

Through the study of cutting-edge research papers, we explore how economists use the OLG framework to investigate diverse phenomena from the evolution of social preferences to environmental sustainability.

1.1 Course Objectives

Upon completion of this course, students will be able to:

Theoretical Foundations: - Understand the core OLG model with its key assumptions - Use the OLG model to discuss about different issues

Technical Skills: - Solve household optimization problems in a life-cycle context with perfect foresight

Research Applications: - Critically analyze how contemporary researchers extend the basic OLG framework - Understand applications to cultural evolution, environmental economics, and development - Develop skills to formulate and solve original research questions using the OLG framework

1.2 Prerequisites

• Intermediate Microeconomics (consumer theory, optimization)
• Mathematical Methods for Economics (dynamic systems)
• Basic knowledge of econometrics is helpful but not required

1.3 Course Format

• Duration: 10 sessions (2 hours per session)

1.4 Assessment

Student evaluation consists of:

• Written Report with Oral Defense (100%): Comment and discuss one of the proposed articles using the OLG model.
  • The objective of the report is to demonstrate your understanding of the core ideas of the article, not every technical detail.
  • The report shall discuss:
    • What the article is about and why it is important
    • Description of the model (general structure, key assumptions, preferences, technologies, equilibrium, dynamics)
    • Key results and economic intuition
    • Critical assessment (strengths, weaknesses, possible extensions)

1.5 Contact Information

• Instructor: Eric Roca (eric.roca_fernandez@uca.fr)
• Office Hours: By appointment

1.6 Bibliography

1.6.1 Core Textbooks

• Croix and Michel (2009)
• Campante, Sturzenegger, and Velasco (2021) Freely available online

1.6.2 Research Papers

• Diamond (1965)
• Galor and Moav (2006)
• Galor and Özak (2016)
• Croix and Dottori (2008)

Campante, Filipe, Federico Sturzenegger, and Andrés Velasco. 2021. Advanced Macroeconomics: An Easy Guide. LSE Press. https://doi.org/10.31389/lsepress.ame.

Croix, David de la, and Davide Dottori. 2008. “Easter Island’s Collapse: A Tale of a Population Race.” Journal of Economic Growth 13 (1): 27–55.

Croix, David de la, and Philippe Michel. 2009. A Theory of Economic Growth. Cambridge, England: Cambridge University Press.

Diamond, Peter A. 1965. “National Debt in a Neoclassical Growth Model.” The American Economic Review 55 (5): 1126–50. http://www.jstor.org/stable/1809231.

Galor, Oded, and Omer Moav. 2006. “Das Human-Kapital: A Theory of the Demise of the Class Structure.” Review of Economic Studies 73 (1): 85–117. https://doi.org/10.1111/j.1467-937x.2006.00370.x.

Galor, Oded, and Ömer Özak. 2016. “The Agricultural Origins of Time Preference.” American Economic Review 106 (10): 3064–3103. https://doi.org/10.1257/aer.20150020.